Chapter 6
Fringe Benefits Tax
FBT
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
1
OVERVIEW OF FBT
• For FBT to apply, there must be an
employer/employee relationship.
• Fringe benefits tax is a separate tax paid
by employers on the taxable value of
any defined fringe benefits provided to
employees or their relatives.
• Any fringe benefits provided are in
addition to wages paid to employees.
• Fringe benefits tax is paid by employers,
not employees.
• Fringe benefits tax is an annual tax.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
2
Payment of FBT
• An FBT year begins on 1 April and ends on
the next 31 March.
• Relevant employers must self-assess their
FBT payable by lodging an annual FBT
return with the Australian Tax Office (ATO)
by 21 May each year.
• Employers pay their FBT payable either by
quarterly instalments or as a single lump
sum, depending on the size of the annual
FBT payable.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
3
Calculation of FBT
• The FBT payable for any FBT year is
determined by calculating the grossed-up
taxable value of all fringe benefits provided
to employees (or their relatives).
• A flat FBT rate applies to the total
grossed-up taxable value of fringe benefits
provided.
• The current FBT rate is 48.5 per cent.
• Any FBT payable is tax deductible to
employers for income tax purposes.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
4
DEFINING FRINGE BENEFITS
For FBT purposes, a fringe benefit is a
benefit provided to an employee
(or a relative) in respect of
employment.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
5
TAXABLE VALUE OF
FRINGE BENEFITS
To determine any FBT payable,
employers must first calculate the
taxable value of the benefit.
Three of the most common fringe benefits
• Car fringe benefits
• Loan fringe benefits
• Expense payment fringe benefits.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
6
Car Fringe Benefits
• A car fringe benefit occurs where a vehicle
owned or leased by the employer is used or
• Made available to an employee (or a relative)
for private purposes.
Examples of private use:
• Shopping journeys
• Holiday travel
• Travel between home and work.
If a vehicle is kept at or near the employee's place of
residence, it will also be deemed to be available for private
use and subject to FBT.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
7
Vehicles Covered
•
•
•
•
•
•
Sedans.
Station wagons.
Mini buses.
Panel vans.
Utilities.
Or, any other vehicle designed to carry less
than one tonne or fewer than nine
passengers.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
8
Vehicles Exempt from FBT
Only if they are used by an employee and only
for travelling to and from work and where
other private use is minor.
These vehicles include:
•
•
•
•
Taxis.
Panel vans and commercial vehicles.
Motor cycles.
Unregistered vehicles.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
9
Methods of Valuing Car Benefits
The statutory formula method
The operating cost method
Employers can use either method for any vehicle each FBT year.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
10
THE STATUTORY FORMULA METHOD
• A statutory formula can be applied to
calculate the taxable value of each
vehicle benefit.
• Where the car was used for only part
of the year, the kilometres travelled is
annualised.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
11
THE OPERATING COST METHOD
The operating cost method uses
specific costs to value each vehicle.
Employers who choose this method must keep a log book
for each relevant vehicle for any consecutive twelve-week
period during the year and subsequently every five years.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
12
LOAN FRINGE BENEFITS
•
•
If an employer provides an employee
with a very low-interest or interest-free
loan for private purposes, a taxable
fringe benefit arises.
Loans include advances of money or
the provision of credit, but not loans of
property.
The taxable value of a loan fringe benefit is the amount by
which the CPI statutory interest calculated on the loan
exceeds the amount of interest that has actually been
charged on it for the FBT year.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
13
EXPENSE PAYMENT FRINGE BENEFITS
An expense-payment fringe benefit arises
when an employer pays (or reimburses) the
private expenses of an employee.
Private expenses of an employee include:
•
•
•
•
•
•
Telephone accounts
Children's school fees
Private health insurance
Mortgage repayments
Rates
Holiday travel costs.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
14
Taxable Value of Expense Payment
Fringe Benefit
Amount of private expense paid
or reimbursed by employer ($)
Less
Amount of any employee
contribution received ($)
Less
Amount of employer’s
payment intended to cover
the business-use portion of
the employee’s bill paid ($)
Equals
Taxable value of expense
payment fringe benefit ($)
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
15
CALCULATING FBT PAYABLE
Because FBT is based on a
self-assessment system,
employers must calculate their
FBT payable
(if any) for each FBT year.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
16
Calculation Steps
1. Identify each taxable fringe benefit provided to
employees during the FBT year.
2. Calculate the taxable value of each fringe
benefit.
3. Total the taxable values of each fringe benefit to
calculate the aggregate taxable value.
4. Apply the gross-up factor to the total taxable
value to work out the grossed-up taxable
amount (there are different gross-up factors for
Type 1 and Type 2 fringe benefits).
5. Apply the FBT rate (%) to the grossed-up
taxable amount to calculate the annual FBT
payable.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
17
Other Administrative Requirements
Employers must disclose, on payment
summaries issued to employees:
• The grossed-up taxable value of most fringe
benefits they provide to employees.
• But only where the value of the benefit
exceeds $1000.
•
These are called Reportable Fringe Benefits.
For FBT purposes, employers must keep records explaining how
they calculated their FBT liability for five years after the date of the
relevant transactions.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
18
CHAPTER 7
Discusses
Superannuation
Guarantee Scheme
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
19